A new report released by research firm Wood Mackenzie suggests that more than $1 trillion in investment is required by 2035 for the mining of five key metals required to accelerate the energy transition.
The investment is required over the next 15 years to accelerate the mining of aluminium, cobalt, copper, nickel and lithium to meet the growing demands of decarbonisation.
The investment needed to meet the demand of the metals is almost double the figure invested over the previous 15 years.
The report notes that although COVID-19 has slowed climate change mitigation efforts this year, governments across the world are using stimulus packages to either kick-start or accelerate their decarbonisation journeys.
Producers are becoming increasingly carbon conscious, with many setting targets for net-zero carbon. Several high-profile majors have offloaded their high carbon assets and/or acquired low carbon replacements.
The green agenda will have a profound impact on the way these companies extract and refine metals, with lower carbon operations an increasing priority.
Julian Kettle, vice chairman of metals and mining at Wood Mackenzie, said: “One can argue about both the pace and scale of the energy transition but the criticality of metals to its realisation is without question. Put simply, the energy transition starts and ends with metals. If you want to generate, transmit or store low/no-carbon energy you need aluminium, cobalt, copper, nickel and lithium.
“However, the fundamentals for several metals are poor and deteriorating, with prices for most well below long-term incentive levels. Understandably, investors are not totally convinced that the road to recovery is assured or of the sunlit uplands that the energy transition represents.
“Long-dated returns from investing in mining and processing sit uneasily against the need for certainty of regular dividend payments or the near-term gains that can be made from other popular asset classes. This severely hampers the ability of boards to undertake the necessary long-term decisions needed to develop the supply that high-growth energy transition related commodities demand.
“This poses fundamental questions – and not just for the consumers of these metals who will rely on predictable, affordable and, for some, ethically sourced supply. If producers cannot meet the most basic of consumers’ needs, a time will surely come when they find ways to innovate out such unreliable raw components from their supply chain.
“Green energy procurement and generation is at the fore and portfolio optimisation is now a must-have on any board agenda. It feels like the tipping point is imminent. We expect carbon to become a non-negotiable component of any AGM – as safety did in the 1990s.”
Learn more about the report.